TMI Blog2008 (7) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the customers and earn brokerage therefrom. There is no stipulation or requirement for the broker to be directly engaged in the purchase and sale of shares at his own. Without making any purchase and sale of shares on his own account, a broker can very well carry on his business of brokerage from sale and purchase of shares on behalf of the customers. To contend that both these activities are tied in a single indivisible rope is wholly incorrect. The Hon ble Calcutta High Court in Sun Distributors Mining Co. Ltd. s case [ 1990 (4) TMI 288 - CALCUTTA HIGH COURT] considered a case in which the assessee s business was that of buying and selling of shares. In that case, it was held that section 73 will apply where any part of the business of the company consisted in the purchase and sale of shares of other companies. It was observed that it may be that in a particular year shares were only sold or in a particular year the shares were only purchased. The section did not require that both sale and purchase should take place in the same year. The shares may be purchased in one year and then sold in the subsequent year. The Hon ble Court held that what was to be seen wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccountant Member. - This appeal by the assessee arises out of the order passed by the CIT(A) on 18-10-2005 in relation to assessment year 2002-03. 2. First ground is against the confirmation of addition of Rs. 1,47,877 being the treatment of loss as speculative. 3. Briefly stated the facts of this ground are that the assessee is a share broker having brokerage income as well as trading in shares in its own name. The Assessing Officer opined that insofar as in trading in shares was concerned it was a speculative business and hence the loss suffered from this activity was liable to be treated as speculative loss. It was explained on behalf of the assessee that its business of share brokering consisted of two components viz., ( i ) sub-brokerage, and ( ii ) trading in share transactions. It was contended that both transactions were to be treated as composite business. Not convinced, the Assessing Officer did not allow set off of the speculation loss from the regular business income. The ld. CIT(A) upheld the assessment order on this point by considering the judgments of Hon ble Calcutta High Court in the cases of CIT v. Sun Distributors Mining Co. Ltd. [1993] 68 Taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r No. 204 contains the object of the Explanation to section 73 and if considered in totality, the Explanation to section 73 could not be invoked against the assessee. For the same proposition, he also referred to another order passed by the Kolkata Bench of the Tribunal in ITO v. GDB Share Stock Broking Services Ltd. [2004] 3 SOT 569 . In the same line he also referred an order passed by the Mumbai Tribunal in the case of Swamini Leasing Investment (P.) Ltd. v. Jt. CIT [IT Appeal No. 2150 (Mum.) of 2000.] It was therefore, summed up that the ld. CIT(A) had erred in coming to the conclusion that loss suffered by the assessee from sale and purchase of shares was speculative in nature and could not be set off of against the normal business income. 5. Per contra the ld. DR, apart from relying the impugned order in detail, contended that the Explanation to section 73 was fully applicable as share brokering activity was different from trading in shares. He further referred to the judgment of Hon ble Calcutta High Court in the case of CIT v. Park View Properties (P.) Ltd. [2003] 261 ITR 473 for making the submissions that the loss incurred on the sale and purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... okerage therefrom. There is no stipulation or requirement for the broker to be directly engaged in the purchase and sale of shares at his own. Without making any purchase and sale of shares on his own account, a broker can very well carry on his business of brokerage from sale and purchase of shares on behalf of the customers. To contend that both these activities are tied in a single indivisible rope is wholly incorrect. 7. The Hon ble Calcutta High Court in the case of Arvind Investments (P.) Ltd. ( supra ) has held that Explanation to section 73 applies to the case of the assessee whose entire business consisted of dealing in shares. The loss incurred by the assessee was a speculation loss. It observed that it would cover cases not only where the part of business of a company consisted of purchase and sale of shares but also where the entire business of the company was of purchase and sale of shares. In reaching this conclusion, Circular No. 204 [which issue would be discussed infra ] was also considered and thereafter the positive conclusion was drawn that the Explanation to section 73 was attracted even to the entire business of purchase and sale of shares and the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in a provision, which is not there. Adverting to the language of the Explanation, it is manifested that its scope has not been combined only to curb the cases which are devices resorted to by business houses controlling group of companies to manipulate and reduce their taxable income, but it extends generally to the cases of the companies which are not covered in the exceptions given in this Explanation. Though the object given by the circular in para 19.2 has been given to curb devices to manipulate and controlling group of companies, but the circular has clearly stated in paragraph 19.1 that the business of purchase and sale of shares by companies which are not investment or banking companies or companies carrying on business of granting loans and advances will be treated on the same footing as speculation business. This view has been taken by the Hon ble Calcutta High Court in the above-mentioned case of Arvind Investments Ltd. ( supra. ). Under these circumstances, we are of the considered opinion that Circular No. 204 cannot be read to control the language of Explanation for giving a restrictive meaning, as has been suggested by the ld. Authorised Representative. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in coming to the conclusion that the assessee was caught within the ambit of Explanation to section 73 of the Act. 11. The Hon ble Calcutta High Court in Sun Distributors Mining Co. Ltd. s case ( supra ) considered a case in which the assessee s business was that of buying and selling of shares. In that case, it was held that section 73 will apply where any part of the business of the company consisted in the purchase and sale of shares of other companies. It was observed that it may be that in a particular year shares were only sold or in a particular year the shares were only purchased. The section did not require that both sale and purchase should take place in the same year. The shares may be purchased in one year and then sold in the subsequent year. The Hon ble Court held that what was to be seen was whether the business of the company consisted in purchase and sale of shares. In that case, the company had a business of buying and selling the shares. The shares were treated as stock-in-trade. In these circumstances it was held that Explanation to section 73 was applicable. Coming back to the facts of our case, we observe that the assessee had shown shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the rival submission and other material on record, we observe from the impugned order that no evidence was furnished before the authorities below in regard to the details of software acquired by the assessee. On the contrary, the ld. AR has placed reliance on three bills to contend that it is a revenue expenditure. From the perusal of the details as per the three bills, we find that this detail is incomplete as the total thereof is not matching with the figure claimed by the assessee as deduction on its account. 16. Be that it may, the question whether the computer software expenses are of revenue or capital character, has been decided by the Special Bench of the Tribunal in the case of Amway India Enterprises v. Dy. CIT [2008] 111 ITD 112 (Delhi) in which certain tests have been laid down for determining the character of such expenses. Since complete details of these expenses are not emanating from the orders of the authorities below nor they are before us, we therefore, cannot adjudicate on the question of deductibility or otherwise of such expenses. In this scenario, we set aside the impugned order on this score and remit this issue to the file of the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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